1. Field of the Invention
The present invention relates to demand aggregation for goods and services and the computerized operation of global buying groups conducted over electronic networks such as the Internet.
2. Introduction to the Invention
This invention provides a method and apparatus to globally locate, encourage and enable all buyers wishing to purchase a particular product or service within a given time frame to join forces in a buying group ("co-op") formed specifically to accomplish the desired purchase. The co-op will enable individual buyers to leverage their combined purchasing power to achieve an economic bargain far superior to that attainable by any one buyer acting alone. This superior bargain most often will be reflected in terms of a lower price.
The invention also provides a method and apparatus that allows each buyer an opportunity to increase the volume of any given co-op in order to further increase group buying power within a co-op. It also includes a mechanism through which buyers can form any number of special interest groups, provide their collective wisdom to dictate which products are featured in future co-ops, or even make a market for a given product or service.
Other key aspects of the invention include a means to allow unprecedented access to certain market and pricing information derived from co-op member input during the life of each co-op. For example, all buyers wishing to join a co-op must submit a binding offer guaranteeing their willingness to purchase the featured item at or below some maximum price determined by each individual member. This collection of purchase offers provides valuable quantitative data regarding price sensitivity for the featured item. In addition, it permits real time yield management decisions that often will benefit both buyers and suppliers.
Specifically, the invention provides data from which a supplier can be informed that if the product price is reduced by a specified amount, the co-op's pool of accepted offers--i.e., final sales--will increase by a specific quantity. The guaranteed increase in volume due to a reduced price would improve its overall yield. Under this scenario, both the co-op buyers and the product supplier benefit from the indicated price reduction.
Other ways in which this invention provides unique benefits to buyers and suppliers of goods and services in electronic commerce are set forth in various parts of this document below.
3. Background (Prior art)
(Buyer problems to be solved by the invention)
The vast majority of retail methods of commerce do not permit any give and take between buyer and seller regarding terms of purchase. Instead they employ a seller-controlled format whereby the seller determines which items are to be offered for sale, when each item will be offered for sale, and the non-negotiable fixed price at which each item will be sold. Traditional stores (including most on-line stores), catalog sales, telemarketing sales, and classified ads all represent examples of this prevalent seller-controlled sales environment.
While the auction sales format permits buyer interaction, it too vests most of the bargaining power in the seller by permitting him or her to select the item to be sold and the time at which it will be offered for sale. Auctions also typically permit the seller to specify a minimum price at which the item may be sold. Moreover, the auction model further deteriorates the power of each individual buyer by pitting him or her against similarly situated buyers, all competing to pay the highest price for the item.
Historically, individual buyers have sought to achieve collective buying power, among other things, by joining a traditional, true "co-op"--i.e., an organization that is actually owned by and operated for the benefit of those using its services. Such organizations usually are comprised of individual members with common business, occupational, or recreational interests. Members of these true co-ops pay annual membership fees (typically sufficient to cover the operating costs of the co-op entity) for the privileges of membership, which often include access to information, products and services related to the co-op's defined purpose.
Traditional buying co-ops (including those emerging on the Internet up to the date of this invention) have been organized around a common set of interests much broader than a particular product (e.g., a digital camera), or even a narrowly defined product category (e.g., cameras). As a result, the extent to which they can aggregate demand for any given product or service is limited by the organization's defined membership base and topical focus. Historically, this breadth of member commonality was required. Otherwise, the benefits achieved through the co-op would be vastly outweighed by the amount of time, money and energy expended to join and maintain the membership.
At the time of this invention, buying groups organized globally on a purchase by purchase basis do not exist. In addition, there is no single mechanism through which people can quickly and conveniently create or join any special interest group of their choosing for purchasing products through a global electronic network such as the Internet.
(Supplier problems to be solved by the invention)
Traditionally, market data regarding the price buyers are willing to pay for a given product or service has been derived primarily from actual sales data. These estimates fail to capture data regarding instances in which sales were rejected by those deciding not to buy the given product. Obviously, the universe of buyers seriously considering purchasing a new flat screen TV includes not only those who will decide to purchase the item, but any number of people who will conclude the current unilaterally fixed price for the item is too high. Under traditional sales models, there is no practical way to capture the number of potential buyers who rejected the sale based on price. Moreover, there is no way to capture the actual price point at which the potential buyer would have purchased the item. If an invention were to permit access to this data globally for a large pool of potential buyers, the invention would be extremely valuable to suppliers of goods and services in that it would permit better pricing, yield management and marketing decisions.
Further, historically there has been no way for a supplier to predict with certainty the price at which a product must be sold in order to increase sales volume by a specified amount. Under traditional sales models, pricing decisions are made based on estimates, such as anticipated product demand and presumed price sensitivity, in the hope that supply will approximate demand at the selected price. If a supplier of a particular item could rely on guaranteed purchase offers to increase volume at varying levels of acceptable sales prices, such information would be extremely valuable to the supplier. Among other things, it would permit instantaneous, accurate yield management decisions that often would encourage win--win price reductions. The supplier wins by improving his overall yield based on volume, and the buyer wins by getting a lower per unit price.
Further, existing sales models do not offer suppliers a clearly superior means of quickly reducing large quantities of specific product inventory (such as a close out item) in a way that will permit both maximization of yield and fast movement of an extremely large quantity of product. Similarly, there exists no clearly superior sales channel through which a supplier can readily turn to swiftly create an extremely large, global market for a specific product such that the supplier's market share for that product literally could substantially increase overnight.
Finally, access to the larger interest groups enabled by this invention present a superior forum for marketing and testing products and services of interest to the membership of a given group. Such activities may be limited to those which are deemed by any given group to be of mutual beneficial to both individual group members and the suppliers of goods and services of interest to such group.
Specific examples of e-commerce systems implemented on the Internet or other networks are disclosed in the following issued patents: U.S. Pat. No. 4,789,928, issued Dec. 6, 1988 to Fujisaki; U.S. Pat. No. 5,794,207, issued Aug. 11, 1998 to Walker et al.; U.S. Pat. No. 5,797,127, issued Aug. 18, 1998 to Walker et al.; U.S. Pat. No. 5,835,896, issued Nov. 10, 1998 to Fisher et al. and U.S. Pat. No. 5,845,265, issued Dec. 1, 1998 to Woolston.
4. Benefits of the Invention
(Buyers)
The traditional shopping experience--buying goods at stores and malls (whether on line or brick and mortar)--was designed by sellers with the primary purpose of promoting commerce for themselves. Not surprisingly, this prevalent sales model gives the seller virtually all of the power and control associated with a given sales transaction. This invention creates a new shopping experience by essentially reversing certain aspects of the traditional seller-oriented sales model. The result is a far more empowering shopping experience for the buyer.
As shown in FIG. 1, a store 10 is simply a collection of products 12. As shown in FIG. 2, a mall 14, of course, is a collection of stores 10. Historically, buyers 16 have had to come to the seller's pre-selected and pre-priced collection of products 12 in order to make a purchase. This invention, represented in FIG. 3, turns the point of sale into a collection of buyers 16 (the "co-op"), rather than products 12. It further permits these co-ops to be located among any number of other co-ops at an Internet or other network site provided by a business entity implementing the invention. This fundamental shift in structure provides many advantages each discussed in detail below.
By creating a means to globally aggregate a large number of buyers in one place at one time (a co-op), this invention enables a tremendous shift in power from the seller of goods and services to the buyer of goods and services. Rather than permitting the product seller to establish the product's sales price, it permits each buyer to establish a maximum price at which he or she will purchase the product. (Notwithstanding this specification of a maximum acceptable price, all co-op members enjoy the full measure of price reductions achieved through the co-op. Hence, each member's offer will be accepted at the co-op's lowest --i.e., the ending--price.)
Co-op members are further empowered by certain other features of the invention. Specifically, after joining a given co-op each member will be given an opportunity to drive volume to further reduce prices by e-mailing people he or she knows who might be interested in joining the co-op. In this way, every member can help the co-op attain its critical mass (which guarantees the success of the co-op) and surplus volume (which serves to drive prices below previously anticipated levels). In addition, the invention permits buyers to help choose which products and brands will be featured in future co-ops. Through this feature, buyers also can actually create a market for a particular product. For example, this input feature would permit a general query regarding whether there is sufficient buyer interest for a particular style of wristwatch (in which one or more buyers had previously inquired). If sufficient demand for the item exists, a business entity implementing the invention could then seek out a jewelry manufacturer willing to make a large volume of the watches and then offer such items to those who expressed interest and potentially others in a future co-op.
The invention's method presents a buying model far superior (from the standpoint of the buyer) to that of the auction sales model. Rather than providing a method by which numerous buyers compete against one another to be the "winner" at the highest price, this method enables buyers to join forces to achieve a lower price at which they all "win."
Further, the invention provides an effective method for focused aggregation of purchasing power (i.e., all people currently willing and able to purchase a featured product without regard to their geographic location, profession, or any conflicting or specific personal interests of the individual buyers within the group). This method of aggregation will generate far greater participation and purchasing power than any traditional co-op. To illustrate this point, consider a typical "small business" co-op. It likely would generate some demand for a particular premium brand computer printer. However, it normally would be limited in its geographic reach. And even if the co-op were operated globally via the internet, its demand would not encompass all people using the internet who might be interested in buying that particular printer. It would include only small business owners (or more likely owners of a particular type of small business). The ability to quickly, conveniently and economically form narrowly defined co-ops is a critical aspect of this invention which is made possible by the technology comprising this invention when coupled with a global electronic network such as the Internet.
The method and apparatus of this invention further provides a means through which individual buyers can aggregate on the basis of broader interest groups for any purpose including access to the latest product and other information of interest to the group.
(Benefits to suppliers)
In order to join a co-op, each buyer must determine the maximum price at which (or below) he or she is willing to purchase the featured item. Such amount is specified in his or her binding purchase offer. That offer is guaranteed by the buyer's credit card. All offers including the various amounts at which they are submitted are collected and summarized in a database. This process enables accurate, real-time yield management decisions which can be used to advocate a lower per unit price. For example, the business entity implementing the invention would be able to represent to a supplier that if the price were lowered by $X, the sales volume will increase by an additional 1,000 units. Although the per unit price would drop, the supplier's overall profit yield may increase due to the substantial increase in volume. Hence, this invention eliminates the uncertainty that often makes suppliers reluctant to lower prices.
In addition, the pricing data described above represents an extraordinarily complete picture of the price sensitivity with respect to a given product because it captures not only actual sales data, but also price specific data on potential sales that were not completed because of price. Further, this invention enables the feasible collection of various other types of market data such as geographic distribution and other characteristics of the buyers interested in a given product. In addition, it enables a superior way to gauge interest in future products and services.
Further, this invention's method of globally creating buying groups on a purchase by purchase basis brings a vast number of potential buyers to the bargaining table. Consequently, it provides a superior method of quickly moving large quantities of specific products. This will be useful to product suppliers in many ways. For example, a supplier might utilize the invention's sales platform to sell a substantial volume of one product for the specific purpose of increasing its market share. It even would be possible under this example for the supplier to specify a minimum sales volume so that no sales are made unless its market share objectives are met. In addition, a supplier could utilize this invention as a platform for unloading a large volume of specific products nearing the end of their product life cycle. Suppliers might also utilize this invention as a means to accomplish swift inventory leveling for cash flow or financial reporting purposes. While there are existing channels through which suppliers can sell closeout products or accomplish inventory leveling, none provide the ability to quickly move a substantial volume of inventory while still maximizing profit yield in the manner described above.
Finally, membership of any given broader special interest groups that can be created through this invention (e.g., camera enthusiasts) might epitomize the target customer for a particular product or service of a supplier. Possible ready access to such group, as possibly limited by each group membership, could be extremely valuable to suppliers for general marketing, product testing, and other purposes.
Definitions
Certain terms as used herein are defined as follows:
Browser: A specific type of client system, referring to an HTTP client enabling the display of various forms of information originating at the server; also capable of sending information, such as requests and personal data, to the server at the request of the end user. A browser is not the only possible or intended client system. Our method and apparatus apply only to the server, and are not dependent on what form of client is used, only that some client exists as the means of input.
Co-op: For the purposes of this application, the term `co-op` as used throughout is not intended to refer to the traditional cooperative form of business which is owned by all of its members. A business organization implementing this invention need not be organized as a cooperative. Instead, we use the term `co-op` to refer to the online manifestation of buying groups who have committed to purchase a certain product within a specified price (i.e., at or below a maximum price). Co-ops are also occasionally referred to herein as `buying groups,` `buying co-ops` and `product co-ops.`
Critical Mass: The volume of acceptable offers necessary before any purchase offers will be accepted. The critical mass may be specified by a supplier. It may also be the sales volume at which the starting co-op price is justified.
Current Price: The price stated as current at any given time during the co-op. One significance of the current price is that availability is guaranteed for offers at or above such price after critical mass is achieved.
E-commerce server: Is here used to refer to a specific server software system, residing on a set of CPUs, that is used to send information to the client system(s) and accepting input from said clients for the sole purpose of taking orders, whether they are for co-ops or not.
Ending Price: The price specified at the end of the co-op, which represents the price at which all offers are accepted.
Featured Product: Any product or product variant identified for sale through a co-op. For purposes of this application, the term `featured product` includes any services which might be identified for sale through a co-op.
HTTP: The Hyper-Text Transfer Protocol.
HTTP server: A specific server software system, residing on a set of CPUs, which is used to communicate with client systems such as HTTP browsers. The HTTP server is only one means of communication between the client and server, and its inclusion in this discussion of our invention is not meant to imply that it is the only means of implementation of the invention.
Offer or Purchase Offer: A binding, non-cancelable offer to purchase a featured product within a price range the maximum of which is specified by the buyer. Each such offer is guaranteed by the respective buyer's credit card at the time it is offered. Making an offer is a condition precedent to joining a co-op. The offer is either accepted or rejected at the close of the co-op.
Price Curve: A description of price as a function, in the mathematical sense, of the number of units. See FIG. 6.
Product and Product Variant: A product is a set of items for sale, which all has a certain set of significant characteristics in common. For example, a particular brand and style of in-line skates, each having the same characteristics, such as design, brand, color, a left and a right skate sold together, etc. A product variant is a subset of a product. For example, size 5 and size 8 of a particular pair of in-line skates are different variants of the same product. As used herein, a product can be a tangible or intangible object or a service.
Server: The term `server` is here used to refer to the set of hardware and software systems that are used to implement co-ops in accordance with this invention. These systems are to be distinguished from the client systems that are used by buyers to participate in co-ops. See FIGS. 4 and 5.
Server process: A computer program that is part of the server software systems, and which executes in its own address space, communicating with other processes via means defined by the operating system(s) of the hardware platforms. Unfortunately, it is necessary to use the term `process` to describe other things than computer programs executing in their own address space in this application, so care has been taken to always use the term `server process` when the latter is meant.
Starting Price: The price listed as the current price at the beginning of each co-op.